| Companies may get to borrow more abroad |
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New Delhi, 26 June The finance ministry might scrap some restrictions on overseas borrowing by companies in next month's Budget and some others later. The ministry is likely to go by the recommendations of a committee on liberalising external commercial borrowings ( ECBs), headed by M S Sahoo, a former director with the Securities and Exchange Board of India. The committee will give its report just ahead of the Budget, but ministry officials are in talks with its members to lift some rules in the Budget itself. The panel might suggest junking the current limits on the foreign loans companies can take, the interest rates they pay on those, quotas by industry and end- use rules. " Why should we have curbs on how much acompany should borrow, and at what price," asked an official who did not wish to be named. These conditions are part of India's old industrial regulations. The Sahoo committee might recommend removing all of them within existing capital controls. The central bank will still keep an eye out for the pressure of redemption of India Inc's foreign loans and their effect on economic growth, inflation and foreign exchange reserves. "External commercial borrowings are not unmixed blessings. We will have to see how to sterilise the economy from its effects," another official, who did not wish to be named, told Business Standard. Turn to Page 20 > EASING ON ANVIL |FinMin plans to relax the ECB regime |It will base its actions on the Sahoo panel' s recommendations, which are yet to come |The panel is likely to recommend doing away with restrictions on individual companies |At present, there are various restrictions, such as $ 750- mn cap under automatic routeon the amount that can be raised as ECB by a company (excluding hotels, hospitals and software ones, which can raise up to $ 200 mn in a financial year) |There also is a ceiling on interest rates at which these loans could be accessed |Among end- use restrictions, these cannot be used for on- lending or investment in capital market, for working capital purposes and for realty sector. |3. 2 bn was raised through ECBs in April, almost three times the $1.1 bn in the same month last year |
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| Companies may get to borrowmore abroad |
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Anish Thacker, partner at tax & audit consultancy EY, said freeing up foreign loans for companies made sense so long as the economy's interests were not jeopardised. |
| Asset classification for infrastructure companies revised |
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Mumbai, 26 June The Reserve Bank of India ( RBI) has provided abreather to infrastructure firms, allowing banks to treat loans to these entities as standard even if the date of commencement of a project is delayed by up to two years. "It is clarified multiple revisions of the DCCO ( date of commencement of commercial operations) and the consequential shift in repayment schedule for an equal or shorter duration ( including the start- date and the end- date of the revised repayment schedule) will be treated as a single event of restructuring, provided the revised DCCO is fixed within the respective time limits," RBI said in anotification. This will only be applicable if the revised DCCO is within two years and one year for infrastructure projects and non- infrastructure projects, respectively, of the original DCCO, at the time of financial closure ( provided all other conditions and terms of the loan remain unchanged). This will give infrastructure firms more leeway on the financing front. |
| Sebi warns MFs over breaches |
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Mumbai, 26 June The Securities and Exchange Board of India ( Sebi) has pulled up the mutual fund ( MF) sector for not complying with the '20- 25' minimum exposure norm and for misuse of funds meant for investor awareness programmes. By Sebi norms, any MF scheme is required to have at least 20 investors, with each owning less than 25 per cent of the assets. However, U K Sinha, chairman of Sebi, said on Thursday that several MF schemes were in violation of this norm, with investor concentration in some schemes as high as 98 per cent. " In some cases we found that while at the end of one quarter a particular investor who had more than 25 per cent had somehow complied. But immediately when the next quarter starts, he is again seen crossing that limit," said Sinha at the 10th CII Mutual Fund Summit. Sebi is said to have written to as many as 30 MFs on this breach. Regulatory sources have said several large institutional investors and wealthy clients, who often park their surplus cash in debt schemes, often end by breaching the single investor cap. MF officials said the breach of investment limits was largely due to operational difficulties. And, that other intermediaries should also be held accountable for this. "Such practices pose huge systemic risk. There are other stakeholders in the industry who deal with such data on a daily basis, like the registrars, who could act as whistle- blowers and keep the regulator informed," said Killol Pandya, senior fund manager, debt, LIC Nomura MF. There is also misuse of the funds meant for investor awareness and education. The Sebi said there are fund houses which meet distributors under the disguise of such awareness programmes. "Sebi was expecting that the money will be very well utilised and will have an impact. I request all the chief executives and the trustees to also look at the quality of these programmes and the manner in which they are conducted," said Sinha. Last year, the market regulator had asked fund houses to set aside money equal to two basis points from their revenue to be used for investor awareness and help in increasing the reach of MFs. The regulator said only a handful of participants would have benefited from such programmes. "The MF industry has so far conducted 41,000 investor awareness programmes, reaching as many as 1.2 million people," contended Sundeep Sikka, chief executive of Reliance MF. Further, Sebi has asked fund houses to comply with the new norm of maintaining at least ₹ 20 crore of assets for debt schemes, a move that could see closure of several. Sebi says there are 69 debt schemes with assets of less than ₹ 20 crore. Sinha says many fund houses not abiding by rules on minimum number of investors, awareness funds awareness programmes |Asks AMCs to implement ₹ 20- crore AUM role for debt schemes ahead of deadline |
| Labour ministry okays new scheme for inspection |
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SOMESH JHA New Delhi, 26 June The Union labour ministry has approved a more liberal inspection scheme aimed at simplifying business regulations and bringing " transparency and accountability" in the system. For this purpose, a Central Analysis and Intelligence Unit (CAIU) will be set up to analyse and collect field data " for a transparent and accountable labour inspection system". The scheme will be brought into effect from October 1 for the Employees Provident Fund Organisation (EPFO) and Employees State Insurance Corporation ( ESIC), inspections under the ambit of the Chief Labour Commissioner (CLC) and the Directorate General of Mines Safety (DGMS). Under the new scheme, inspection of factories will be carried out under 11 Acts, including the Minimum Wages Act, Contract Labour Act and Child Labour Act. There are different inspection guidelines for EPFO, ESIC, CLC and DGMS. For instance, inspection under the ambit of CLC would be mandatory in areas where a fatal or serious accident has occurred, strikes or lockouts have taken place in the past two years, and in closed establishments where workers' dues are awaiting settlement. Optional inspections on the direction of CLC would take place in the case of hazardous manufacture or in establishments where contract workers either constitute half of the workforce or more than 250 employees. The optional inspection would be automatically generated through a system, according to the priorities of the organisation, the ministry said. Every organisation will also prioritise the areas requiring mandatory inspection, and the cases forwarded by the CAIU will be on data and evidence basis. "Each organisation would indicate the criteria which it considers most important from its point of view where the inspections would be mandatory. The optional inspection also would be generated through computer, using predecided number tables, taking into account the priorities of the organisation for bringing in transparency and accountability in labour inspections," a ministry note said. The employers will feed periodical returns in the system and the inspectors will file detailed inspection report. Certain guidelines for inspectors have also been issued, such as maintaining registers, carrying out inspections in normal working hours, uploading the report within three days of inspection, etc. Inspection of factories will be carried out under 11 Acts, including the Minimum Wages Act, Contract Labour Act and Child Labour Act |
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